Model Energy Code for Residential Buildings

The Model Energy Code for Residential Buildings

State Legislative Report
June 1997
Vol. 22, No. 4

Many state and local governments facing the need to ensure availability of affordable, quality housing, coupled with an increased demand for energy and uncertainty over future energy costs, are considering the benefits of adopting cost-effective energy codes for new homes. Adopting, implementing and enforcing a code such as the Model Energy Code is one way to improve the energy efficiency of America's homes and save homeowners money. The Model Energy Code is a national energy efficiency building code for new single family and low-rise multi-family structures. Building homes that are energy efficient at the outset benefits constituents by locking in energy and cost savings for present and future homeowners, and provides an effective tool for public policymakers to promote the wise use of resources, both locally and nationally. Recognizing the many benefits of the Model Energy Code, many lenders offer home mortgages that improve borrowers' income eligibility because the lenders are confident energy cost savings can be directed to mortgage payments. To make energy efficient homes more affordable, the Federal Housing Administration, Veterans Administration, and the Rural Economic and Community Development Service also require compliance with the Model Energy Code to qualify for their federal home loan guarantee programs.

The Model Energy Code, published by the Council of American Building Officials, is the most commonly used residential building energy code in the United States. Approximately half of the states have adopted it, or a code that is as stringent, if not more so. More than 50 percent of new homes constructed today are required to be built to state codes that meet or exceed the Model Energy Code. Adoption of the Model Energy Code:

• Recoups the higher costs of building an energy efficient home with energy and tax savings within one to five years;

• Increases home comfort for occupants;

• Enables home buyers to qualify for mortgage packages that make it easier to buy an energy efficient home;

• Improves the home's marketability and resale value;

• Improves the home's durability;

• Provides air quality benefits to society by reducing pollution from energy production, and;

• Stimulates state, local and national economies by lowering utility bills.

Why Energy Codes?

State and local governments have authority over the legally binding building codes that govern most of the residential building construction throughout the United States. (The Department of Housing and Urban Development governs the construction of manufactured housing, often called mobile homes.) Originally developed to address public health and safety concerns, building codes in many jurisdictions also incorporate energy efficiency standards for new homes.

Residential and commercial buildings annually account for more than one-third of the nation's total energy consumption and two-thirds of its total electricity use. The U.S. Department of Energy (DOE) estimates that as more homes are built between 1995 and 2015, residential sector energy consumption, as a percentage of total energy consumption, will increase by approximately 17 percent.

The Model Energy Code

The Model Energy Code-a national code updated annually and republished every three years in a process involving local building code officials, builders, manufacturers, state and federal officials, researchers, and others-is designed to provide flexibility to architects and builders in designing and constructing durable, comfortable and energy efficient homes. Model Energy Code requirements apply to the construction of new one- and two-family homes and low-rise (three stories or less) multifamily buildings such as town homes, plus additions to existing buildings. The Model Energy Code establishes minimum thermal performance standards for the building "envelope": ceilings, walls, floors and windows. It also sets criteria that restricts air leakage, insulates ducts and pipes, seals ducts, and controls domestic hot water heating systems. Most residential heating, air conditioning and water heating equipment already meets standards set by the National Appliance Energy Conservation Act, which the Model Energy Code does not supersede.

While the Model Energy Code provides architects and builders with a widely accepted set of minimum standards for construction, the code also offers compliance flexibility. It permits tradeoffs among window efficiencies, insulation requirements for ceilings, walls, floors and foundations, and heating and air conditioning equipment, so long as the house meets the Model Energy Code's minimum energy use requirements. For example, if the prescribed ceiling insulation in a home exceeds the minimum requirements, that excess efficiency can be traded for less floor or wall insulation, and the home will still comply with the code.

Furthermore, the Model Energy Code recognizes that "one size does not fit all;" minimal building envelope thermal requirements vary, therefore, based on climatic differences. For example, since the amount of energy needed to heat homes in Florida is much less than that needed to heat homes in Minnesota, the insulation requirements in southern climates are less stringent. MECcheckTM software (see Appendix A for more information) makes it fast and easy to design and build homes that comply with the Model Energy Code.

The federal Energy Policy Act of 1992 required states to review their residential energy efficiency codes and determine whether it was appropriate to revise their code provisions to meet or exceed the 1992 Model Energy Code. In 1994 and 1996 the U.S. Department of Energy issued "determinations" regarding the 1993 and 1995 editions, respectively, of the Model Energy Code. These determinations found that these editions were improvements over previous editions. Thus, states must certify whether it is appropriate for them to update their codes to include provisions of the newer editions.

Roughly half the states have residential codes that meet or exceed the 1992 edition of the Model Energy Code. In addition, more than 30 cities and counties in Arizona, Colorado, Idaho, Missouri, Nebraska, Nevada, South Carolina and Texas have adopted residential codes that meet or exceed the 1992 Model Energy Code. Georgia, Maryland and Vermont have adopted the 1995 Model Energy Code.

MEC Home Purchase Price

Because they are making such a large investment and are often limited in the amount of money they can borrow, home buyers are very price-sensitive. Although they may recognize its benefits, home buyers often view an energy efficient home as something they cannot afford. How much more does it cost buy a Model Energy Code-compliant home than a similar home that does not meet the minimum requirements? It depends on a number of factors-the size of the home, labor and material costs in different localities, local climatic conditions, and current energy code requirements (if applicable) or construction practices.

According to the Department of Energy's Pacific Northwest National Laboratory, the additional cost of meeting the Model Energy Code varies, depending on whether homes are already being built with energy efficiency in mind. Some builders may already be building homes to Model Energy Code levels (whether or not they are aware of the fact) and would incur no additional cost, while other builders may face an increase of $100 to $3,000 in additional construction costs. These cost impacts are based on economic analyses of the Model Energy Code in Colorado, Maryland, Michigan, New Jersey and Ohio for new housing. The key questions for home buyers and homeowners, therefore, are whether the savings from owning a Model Energy Code home will offset any additional costs associated with purchasing the home, and whether the house will still be affordable.

Cost-Effectiveness

The same economic analyses evaluated the cost impact (including such factors as mortgage costs, energy cost savings, and income and property tax implications) of building Model Energy Code single-family homes and found that even with increased home purchase prices and property values, the homes generally resulted in cumulative energy savings to the homeowner within one to five years. Payback periods will vary by location, regional prices for electricity, oil and natural gas, home size, floor and window area, mortgage packages, projected savings, property taxes, inflation and other factors, but homeowners can still expect increased construction costs to eventually be offset by energy savings.

A Model Energy Code home's cost effectiveness extends beyond the energy savings it provides homeowners. The use of high quality building materials improves the home's durability. Homeowners will find their home's resale value higher than expected because potential buyers value homes that are built well and that provide utility bills that are lower than those of noncompliant homes. Similarly, builders and realtors can attract buyers by marketing a Model Energy Code home's energy design and cost-saving potential compared with older homes.

The voluntary home energy rating systems in place in more than half of the states also give value to homes that comply with the Model Energy Code. Rating programs analyze a home's energy performance and assign a quantitative (0-100) or qualitative (typically one to five stars) rating to the home. Home energy rating systems enable homeowners and home buyers to compare the relative energy efficiency of homes. Most systems will automatically assign Model Energy Code homes a rating (usually 80 points) that provides a benchmark for evaluating the energy efficiency of homes. Rating programs provide potential home buyers with valuable information on home energy consumption characteristics, opportunities for cost effective improvements to make the home even more efficient and options for financing the purchase of an energy efficient home.

Energy Efficiency Financing Makes Model Energy Code Homes More Affordable

The Model Energy Code's impact on the consumer's ability to obtain a home mortgage has been at the center of deliberations among state and local officials. What if the additional expense associated with Model Energy Code compliance takes homes beyond the range of affordability for many home buyers? Potential home buyers may eliminate a Model Energy Code compliant home from consideration if they cannot afford the monthly mortgage payments.

Today, a wide variety of energy efficient construction techniques are available to help reduce home energy use. Many home buyers may feel they cannot afford to spend additional money upfront for an energy efficient home despite the long-term cost savings associated with lower energy use. When the added costs of Model Energy Code homes are included in and paid for over the term of the mortgage, homeowners can expect to pay less than $10 more per month yet have a positive cash flow from energy and cost savings in one to five years.

Recent developments in the secondary mortgage lending market are making energy-efficient homes more affordable. The role of the secondary mortgage market is significant because about half of all new single-family mortgages provided through primary lenders (commercial banks, credit unions, etc.) are sold to secondary market investors, ensuring a large supply of money is available, at a lower cost, for home buyers.

The secondary mortgage market is also playing a key role to make Model Energy Code homes affordable for more buyers. For example, the Federal Housing Administration (FHA), whose main activity is insuring residential mortgage loans made by private lenders, has recognized that qualifying buyers for an energy efficient home does not adversely affect their ability to pay their mortgages since energy cost savings can be directed toward payments. Therefore, FHA provides borrowers a 2 percent "stretch" in its debt-to-income ratio requirements (monthly mortgage payments-payment, interest, taxes and insurance-divided by gross monthly income before taxes) to qualify for a mortgage. In a standard FHA transaction, the debt-to-income ratio is set at 29 percent; based on the savings from owning a home that meets or exceeds requirements of the 1992 Model Energy Code, however, FHA will increase the ratio to 31 percent.

Using Table 1 as an example, assume a new home sells for $111,500 while an identical home built to comply with the Model Energy Code sells for $1,200 more, but reduces monthly utility bills by $15-approximately 11 percent lower than the non-Model Energy Code home. Assume further that the home buyer will make a 5 percent down payment for either home and that the home buyer wants to qualify for a 30-year fixed-rate FHA loan at 8 percent. Stretching the debt-to-income ratio 2 percent allows a potential home buyer earning $2,000 less to qualify for the purchase of an identical home that is more energy efficient.

Table 1

Example of Housing Affordability

(Data apply to a home in Wichita, Kansas)

	Non-MEC House	MEC Compliant House
Purchase Price	$111,500.00	$112,770.00
Monthly Payment, Interest, Taxes and Insurance	$901.15	$912.50
FHA Qualification Ratio	29 %	31 %
Gross Annual Income Required	$37,300.00	$35,300.00

Consumers who were previously unable to qualify for the Model Energy Code home because of income restraints could now potentially qualify under the "stretch" mortgage. Although this example demonstrates that stretch mortgages can influence the ability to purchase an energy-efficient home, it is important to remember that affordability is also a function of interest rates, state and federal taxes, mortgage insurance and payment options, homeowners insurance and actual energy savings.

As state and local officials consider Model Energy Code housing affordability issues, they need to bear in mind that residential energy efficiency financing is often tied to compliance with the code. The Federal Housing Administration, for example, will not insure or guarantee a residential mortgage unless the home complies with the 1992 edition of the Model Energy Code. Additional information on home energy efficiency financing is included in the NCSL report Market and Financial Incentives to Improve Home Energy Efficiency.

Model Energy Code Adoption, Implementation and Compliance

Code adoption, implementation, and enforcement varies from state to state. Building codes may be required by state legislation or local government ordinance. City and county officials usually assume responsibility for enforcing codes. Some state agencies have authority to promulgate and enforce building codes and their implementation regulations. States may adopt specific editions of the Model Energy Code by reference or use it as a model and amend specific provisions to meet state-specific conditions such as climate or cost-effectiveness requirements. Where state legislative and regulatory authority over building codes is limited or absent, city and county governments may assume responsibility for code adoption and enforcement.

Designers, architects, builders and enforcement officials are often unfamiliar with the requirements of the Model Energy Code. They may believe that the building industry is already over-regulated and may be reluctant to support full implementation of the Model Energy Code. Enforcing the code can also be difficult for local building inspectors due to declining resources that state and local building officials use to hire, train and certify enforcement personnel. However, while building code officials inspect homes for compliance to a wide variety of codes, they should be able to incorporate energy inspections into their normal regimen and find the Model Energy Code no more burdensome than previous energy codes.

Education and Training

Though the average home buyer may not have the expertise, time or resources to make informed decisions about the purchase of an energy efficient home, educational programs exist that increase awareness and understanding of the Model Energy Code and energy efficient homes for builders, buyers, realtors and lending institutions. Although state and local officials usually run these programs, local utilities, trade associations and consumer groups also are effective conduits of information.

Ideally, training programs should target all relevant stakeholders-builders, realtors, designers, architects, building inspectors, the lending community and others-in order to maximize building code benefits to the economy and to public safety and welfare. The most important group is the code officials and inspectors responsible for enforcing the Model Energy Code. State and local government personnel may take advantage of Model Energy Code workshops and training programs funded by the U.S. Department of Energy, as well as state-of-the-art software programs that help architects and designers comply with Model Energy Code requirements. One such program, the Department of Energy's MECcheckTM software, is highlighted in Appendix A.

Builder Concerns

Some builders are opposed to the Model Energy Code for a number of reasons: the need to reduce construction costs to maximize profits in a competitive industry; the perception that home buyers are more interested in additional amenities such as high quality cabinetry and countertops than energy efficiency; and many builders are already building energy-efficient homes. In a competitive industry that faces many state and local government permitting and code requirements, construction can be costly and compliance burdensome. Some builders will choose to meet the minimum code requirement while others will scrimp to save.

Although the National Association of Home Builders does not support nationwide adoption of the Model Energy Code because of varying construction costs and state code compliance policies, home builders in different states do support the code and call for a level playing field where everyone must meet the code.

When the Model Energy Code is adopted, builders may be unfamiliar with its flexibility and may not understand that there are alternative paths to compliance. For example, some builders may feel the Model Energy Code's slab and basement insulation requirements are too costly, ineffective and provide a path for termites into the home. The Model Energy Code does provide alternatives to basement insulation and the way it can be installed, however, and there are several ways to mitigate termite problems.

Recent State Actions

As noted earlier, building codes can be implemented statewide by state law or by state regulators who promulgate and adopt state building codes. Local governments are responsible for code inspection and enforcement, and they may adopt their own codes as well. In many locations where the Model Energy Code has been adopted, the Department of Energy and state agencies have already begun providing workshops for builders and code enforcement officials. The following are recent examples of state legislative and regulatory actions to implement the Model Energy Code.

In March 1996, the Alabama Residential Energy Code Board adopted a simplified version of the 1993 MEC called the Residential Energy Code for Alabama; two cities are considering implementing the code in their jurisdictions. Pima County and Tucson, Arizona, have adopted the 1995 Model Energy Code at the local level. Legislation in Kansas moved authority for developing energy codes to the state legislature and requires disclosure of whether new residential construction meets the 1993 Model Energy Code. The Massachusetts Board of Building Regulations and Standards unanimously approved adoption of the 1995 Model Energy Code with amendments to accommodate specific conditions in the state. The Board of Building Regulations and Standards, along with the Division of Energy Resources, will begin an aggressive training program to educate builders, designers and code officials about the new code requirements, which take effect on Sept. 1, 1997.

Ohio's Office of Energy Efficiency recently surveyed existing building practices to determine the degree of difficulty and expense for home builders to comply with the Model Energy Code, along with the costs and benefits for home buyers. The study concluded that half of the new homes examined would already pass the upgraded code without additional work. It also found that buyers of homes built to the new standard should receive a cumulative positive cash flow from any additional energy efficiency investment in about four years.

In Michigan, builders and the State Construction Codes Commission are working together to develop a cost-effective residential energy code. A recent University of Michigan study concluded that the Model Energy Code is cost-effective for homeowners, flexible for builders, and achieves significant reductions in energy use, home energy bills and air pollution. On May 8, 1997, the Vermont legislature adopted the 1995 edition of the Model Energy Code, with state amendments, as the state residential energy code.

Conclusion

Adopting the Model Energy Code can lower residential utility bills. Although it may result in more stringent requirements for home construction-such as requiring more insulation or more efficient windows and doors-the Model Energy Code will save money for present and future homeowners. Improved energy efficient design and construction will, in most cases, raise the purchase price of a home, but these additional costs will be paid back to the homeowner with savings from lower energy bills within one to five years. Mortgage qualification guidelines and new energy efficiency financing programs now make it easier for home buyers-including low-income, first time buyers-to purchase a home that complies with the Model Energy Code.

Active involvement of builders, the financial community, state and local building code officials and realtors can help promote the implementation and enforcement of the Model Energy Code. Education and training programs and software are already available for builders and building code officials and will improve compliance and enforcement. As states consider how to provide their constituents with quality, affordable housing that also saves homeowners money, they may want to adopt the Model Energy Code. In those areas where the Model Energy Code has been adopted, states should work with local governments to improve implementation and enforcement.

Appendix

Model Energy Code Compliance Made Easy

MECcheckTM is a group of products for demonstrating and verifying compliance with the Model Energy Code. MECcheckTM makes it easy for designers and builders to determine whether new homes and additions meet the requirements of the Model Energy Code, and simplifies compliance determinations for building officials, plan checkers and inspectors. MECcheckTM combines simple maps of state climate zones, tables of prescriptive requirements, easy-to-use software, worksheets, and a comprehensive manual into a versatile package of Model Energy Code support tools.

MECcheckTM offers three ways to determine compliance with the Model Energy Code. The prescriptive approach allows builders or designers to select from various combinations of energy conservation measures based on climate zone location. Each combination, or "package," specifies insulation levels, glazing levels, glazing U-values (thermal performance), and sometimes heating and cooling equipment efficiency. By locating the correct climate zone and consulting the appropriate table of prescriptive packages, builders and officials can ensure the project meets one of the packages listed for that zone.

The trade-off worksheet approach enables users to vary insulation levels in the ceiling, wall, floor, basement wall, slab-edge and crawl space; glazing and door areas; and glazing and door U-values. Based on proposed plans and specifications, the user enters information on a worksheet and calculates a total insulation value. By comparing the value to what is required for the climate zone, the user can determine if the home meets minimum Model Energy Code requirements. If the home does not meet the minimum requirements, the worksheet can be used to examine different combinations of insulation levels, window or door products, and areas for compliance.

The MECcheckTM software approach does the same calculations as the trade-off worksheet but automates the procedure on a computer. Special features allow builders to trade off heating and air conditioning equipment efficiency, as well as window and insulation efficiencies.

MECcheckTM is available for a nominal cost from the U.S. Department of Energy's Building Standards and Guidelines Hot Line at (800) 270-CODE, or for a small duplication fee from the U.S. Department of Housing and Urban Development at (800) 245-2691. In addition, MECcheckTM can be downloaded at no cost from the Building Standards and Guidelines Internet home page at http://www.energycodes.org.

Contacts for More Information

Stephen Turchen Office of Codes and Standards U.S. Department of Energy 1000 Independence Ave., S.W. Washington, D.C. 20585 Phone: (202) 586-6262 Fax: (202) 586-4617 http://www.eren.doe.gov/buildings	Ronald Nesse Building Energy Standards and Guidelines Program Pacific Northwest National Laboratory Richland, Wash. 99352 Phone: (509) 372-4217 http://www.pnl.gov/buildings/stand.html
Kate McQueen Building Codes Assistance Project Alliance to Save Energy 1200 18th St., N.W., Suite 900 Washington, D.C. 20036 Phone: (202) 530-2200 Fax: (202) 331-9588 http://www.ase.org/	Michael O'Brien National Association of Home Builders 1201 15th St., N.W. Washington, D.C. 20005-2800 Phone: (202) 822-0300 Fax: (202) 822-8873 http://nahb.com/

To order a paper copy of this State Legislative Report, contact the NCSL Publications Department. We can be reached by telephone at (303) 830-2054, or by fax at (303) 863-8003.

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